Policy in Professional Sports and Organizations - Essay Example

FINANCE AND ACCOUNTING Question: Critically evaluate the approaches and policies to achieve competitive balance in North American sports and European sports through an examination of competitive balance Philosophy and Policy in North American and European professional sports and organizations. Illustrate your argument with reference to competitive balance policy in the NFL and current developments in European football. Instructor: Statement of Authenticity:” I confirm that this submission is all my own work. Any quotations are properly cited using the Harvard referencing method. All errors and omissions are my responsibility alone”. Word count: 1569 Team Sports Economics Sports characters, occasion, and organizations influence our society in a wide, diverse and sometimes in unanticipated ways. Some of the most critical policy issues stirring sports in the contemporary world originate from an interdisciplinary overview that includes economics, history, urbanization, non-profit administration, public health communications, political science and philosophy (Mildner and Santo, 2010 p.13).This essay critically evaluates the approaches and policies incorporated by North American sports and European Sports to achieve a competitive balance through the examination of competitive balance in Philosophy and Policy1. Generally, policies and philosophies in sports enable us to comprehend and asses complicated and disputed topics in the word of sport today especially in this paper, the National Football League (NFL) and the European League. Policies and philosophy usually review affairs related to professional sports along with the outstanding natures of American and European sports. In addition they deal with matters concerning decision making, conflict resolution, cities and public finance and economics2. As part of sports’ history, policies and philosophies are the building foundations of leagues strengths and weaknesses (Bell, 1950 p.76). Moreover, when examining policies and philosophies in sports, one should consider the economic impact and consequences because they work conjointly. Policy analysts and organizations must put into consideration the extremity of the economic impact analysis in order to ensure that they base their findings and decisions on the appropriate outputs3. Particularly, this is a fundamental basic requirement as it relates to the role of the opportunity cost. (Rosentraub, 2007 p.223). For instance, one way used by American and European sports organizations to achieve a competitive balance is through the use of proposed annual payments on bonds sold to investors from an added increment in the local sales tax, revenue sharing with the aim of generating income. In return, these organizations use the profits to build new facilities like stadiums and raise athletes’ salaries for example in NFL where Romo restructured his contracts on a $12.5 million for salary cap purposes. If such developments don’t occur then proposed tax would be useless. As Noll and Zimbalist (1997, p60) conclude…”tax collections are simply transferred to those who build and operate the public investment (in this instance, salary cap bonuses).Whereas taxpayers normally regard these taxes as a cost to themselves, from the perspective of the society as a whole, taxes are simply transferred from one pocket to another”. Salary caps and revenue sharing accomplish very calculated and important league offices with massive payoffs, the same goal they have been fighting for since the reception of the reserve clause more than 130 years ago; to systematically lower player’s salaries. In details, competitive balance in relation to the NFL and current development in the European Football refers to the situation where no organization has an unfair advantage over the other4. It is a fundamental feature for the future success of professional football. League profitability is sustained via the transfer of money from players to owners which as earlier discussed is generated from revenue sharing, salary caps, and luxury taxes. Increasing competitive balance increases fans interest hence getting them to attend more games and spend more money thereby raising profits for the league. The key points stated here are that competitive balance is a function of the League’s policies and that if a club is properly managed, it has a plausible optimism for basic prosperity. According to the ‘uncertainty outcome hypothesis, higher levels of competitive balance, reflected in more uncertain outcomes increase match attendances, television audiences and overall interest. However, in a free market, organizations with greater financial resources like the American National Football League due to densely populated cities, more remunerative patronage deals and massive shares of television telecasting power can enlist talented players, advance team’s achievement and increase their dominance. This in return can undermine the competitive balance, thereby leading to uncertainty of outcome. Moreover, it can risk the maintenance of the sports league because of the multiple predictability of outcomes. In relation to the NFL and European football, one can argue that presence of antitrust and minimal competitive balance has been used by them to justify restrictive disciplines that would not be accepted in other industries. Accurate measurements is a crucial factor in such analyses, correspondingly considerable endeavor has been applied in measuring competitive balance. Some policies incorporated by the NFL and European football League in relation to competitive balance include tracking its movements over the seasons, evaluating the outcome of regulatory, organizational and other transformations and adjustments in career systems Standard computation of measurements of dispersion, imparity and consolidation, implicit to closing of season league such as percentages of winning and points are usually used. The most commonly used measurement is the relative standard deviations(RSD) .It is generally considered the most useful “ because it controls for both season length and the number of teams, enhancing a distinction of competitive balance over time and between leagues”. One of the motivations of the fans in the National Football League is the belief that the league is fair. This means that every team in America has a chance of winning. For example, Carolina Panthers in 2001 put on the greatest show of futility in the NFL (at least since the league went to sixteen-game schedule thirty years ago)5. They won their first game and then lost fifteen games in a row 6.An immediate explanation to this kind of fairness is the salary cap, which refers to the absolute limit on how much money each team spends on a total player payroll each year. This means that no team in the National Football League can spend significantly more than the other which in turn means that every team has the capability of winning as their talent equal. This makes the National Football League a miniature for certain theories of distributive justice. Justice is a model of moral philosophy that deals with issues of fairness and rights. This means that the increase of fairness should correspond to a decrease in the number that represents competitive balance, so that the RSD equals to one. Over the past decades the value of televised rights has increased tremendously in the European football leagues. For instance, in the 2011-2012 season, the premier league budgeted at more than 1.1 billion euros in revenues from media rights sales to clubs. Other Leagues have followed the same trends, although the value of the league depends critically on the size of the country for example, Belgian Jupiler pro League budgeted for 55.2 million euros per season. One policy adopted by the European football league is the collective system7. However, this system is somehow controversial among economists. The European commission, which is accountable for competition policy in Europe has accepted collective sales under certain circumstances specifically recognizes it might be “significant for the redistribution of income and thus can be a requirement for achieving higher solidarity between sports” (Commission of the European Sports, 2007 p.6). On the contrary, broadcast right sales may have an effect on competitive balance. For example, in the 2011 season, UEFA distributed 754 million euros of the prize money among the 32 teams that participated in the Champions’ League group phase and beyond. Clearly this gives qualifying teams an added advantage in the national league8. Leagues earning more money in the European league have a lower competitive balance irrespective of the sales system they use. If these factors are not regulated, there is a threat of over/under estimating the effect of the sale system on competitive balance. Another factor to put into consideration when controlling sale system is the size of the national market, the distribution of the home market sizes among the teams. Most leagues in Europe opt for distribution schemes that are partly based on performance in the previous season or the number of appearances in live television, which both favor the large market teams. In the premier league, for example, Manchester United and Manchester City netted the largest amounts in the 2011 with around 60 million euros each, whereas small market teams like Wolver Hampton and Boston only received around 40million euros. To comprehend why Leagues distribute more revenues to large market teams, the internal decision making in the league is considered. Large markets are more sovereign in negotiating a distribution scheme. This allows them to get larger shares than their competitors. (Peeters, 2012 p.23) A second result from the analysis confirms the finding of Pawloski et al (2010, p.45) who have proved that the champions league prize money distribution minimizes competitive balance in national leagues. Again, it seems at odds with the desire to protect the competitive balance to present huge sums of money to each country’s top team. European soccer offers the relegation system combined with qualifying for lucrative tournaments based on the end of season results. This keeps the fans interested and teams to work harder to reach the expected targets. Bibliography Commission of the European Communities. (2007), EU White paper on Sports.p.6 Mildner, G., Santo, C. (2010).Sports and Public Policy. Print.p.13 Peeters, T. (2011)’Broadcast rights and Competitive Balance in European soccer’. International Journal on Sports Finance 6(1) 23-39 Rosentraub, S. (2002) ‘Doing Better’. Sports, Economic Impact Analysis and School of Public Policy and Administration.7 (6) 220-243 Read More